Cryptocurrency mining activity is continuing to grow, yet the regulatory landscape still doesn’t appear to be very clear. Here’s a quick guide on how some countries are approaching this emerging industry.
After the Iranian government decided to cut off the power supply to local bitcoin miners back in June 2019, an air of uncertainty seems to have come to the surface again.
Despite this rash action by Iranian officials, bitcoin, in particular, has experienced a surge in prices and mining hash rates surpassed 69 quintillion hashes per second by 1st July 2019.
Crypto mining is very much alive and booming. However, the events in Iran are a reminder that the volatile nature of regulation will continue to shift from nation to nation.
In the following sections, you’ll get to know what crypto mining is and the current stances each country has taken over the past couple of years towards the industry.
What is crypto mining?
Cryptocurrency mining is a process in which transactions for various forms of crypto assets are verified and added to the blockchain digital ledger.
Every time a cryptocurrency transaction is made, a miner is responsible for authenticating the information and updating the blockchain.
The mining process involves competing with other crypto miners to solve complex mathematical issues with cryptographic hash functions that are linked with a block containing the transaction data. The first miner to crack the code gets to authorise the transaction and earns small amounts of cryptocurrency of their own.
However, a crypto miner needs a computer with particular hardware to have a realistic chance of competing with other miners.
An overview of crypto mining in different countries
While China might have the largest population in the world, its relationship with cryptocurrencies has been rather closed in recent years.
Financial institutions have banned bitcoin trading, initial coin offerings (ICOs) and crypto exchanges. Yet, China does have a major stake in the global hash rate, with its mining pools reportedly mining around 70% of all the coins created on a yearly basis. This largely boils down to China’s surplus of electricity.
Although, if the whispers of April 2019 are sanctioned, the government could end up banning crypto mining in the country in the near future. Only time will tell if this happens or not.
In stark contrast, Russia doesn’t have any definitive regulations in place for mining, although using cryptocurrencies like bitcoin as a payment for goods and services is illegal. In time, there might be fines for cryptocurrency mining operators, so it’s certainly a development worth tracking.
One of the more favourable crypto-friendly nations for miners is Canada. Having classified cryptocurrency as a commodity, it’s been welcomed as a financial means. Mining operators are even able to apply for better electricity rates. The only drawback is that any profits made by businesses when mining are taxable.
The United States has taken a similar approach by classifying bitcoin as a commodity back in September 2015. It’s worth noting that different states have varying stances on mining activity. In fact, Plattsburgh in New York banned it altogether after citizens complained about rising electricity bills.
Moving back to the EU, the Czech Republic is home to one of the biggest mining pools in the world, Slushpool – which accounts for 7.5% of the total hash rate distribution. The government doesn’t regard bitcoin as a legal tender and classes cryptocurrency as an intangible asset.
Iceland has also established itself as a cryptocurrency mining hub, with Genesis Mining reportedly using more energy than all of the homes in the country.
In France, any conversion of crypto-assets into fiat currency by internet platforms that are playing the role of intermediary between buyers and sellers is deemed to be a payment service. This means they must be authorised before providing the service.
It’s a little more complex in Germany, with three regulators overseeing crypto assets. The main one is the Federal Financial Supervisory Authority (Bafin), which provides licenses and enforces actions relating to crypto-related business like mining. Bafin is responsible for the “Prudential oversight on licensed institutes including those offering crypto-asset related services”.
The UK also has the same amount of regulators to contend with as Germany. The HM Treasury develops policy and works with other regulators to improve the crypto-asset market and produce a robust framework. The Bank of England monitors prudential exposures of banks and insurance companies to crypto-assets and gives authorisations to entities to engage in transactions.
Finally, the Financial Conduct Authority (FSA) oversees all regulated firms and financial services activities.
What does the future hold for crypto mining?
While the future of crypto mining is heading in the right directions, regulations still remain less transparent.
The only realistic solution to bring more clarity on the matter is if the European Banking Authority successfully introduces a pan-EU rule on crypto assets.
However, the chances of rolling out such a drastic measure in the immediate future seem very slim.
If you’re interested in crypto mining and learning more about it, get in touch with our expert team. We can guide you through the regulatory hoops involved and give you proactive advice on how to use the blockchain to monopolise the market.